Changes in Partnership Audit Rules Affect Partnerships and Most LLC’s

Beginning with 2018 tax returns, new procedures will take effect for IRS audits of partnership tax returns. These procedures will apply to partnerships and limited liability companies taxed as partnerships unless those entities are eligible to opt out and elect to do so.

The general rule under the reforms is that the IRS will make adjustments and assess and collect tax (including penalties and interest) at the partnership level. As a result of the new audit procedures, there are a number of issues that should be addressed by the entities to which the new audit regime applies. Among the most important issues to address are those relating to the new "Partnership Representative," such as the appointment, duties and powers of that person.

Lenhart Pettit recommends that all clients consider the potential impact of these rule changes on their partnership agreements or LLC operating agreements. Our tax law attorneyscan help clients review and amend their agreements.

This tax law update is provided by Lenhart Pettit for informational purposes only and is not legal or tax advice on any matter. Any use of the tax information contained in this communication is subject to the advice and guidance of a tax professional.

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